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Five Below (FIVE) Up 73% in Six Months Beating Coronavirus Woes

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Five Below, Inc. (FIVE - Free Report) stock is moving up the charts amid COVID-19 tensions, thanks to its impressive business strategies. Undeniably, the company’s focus on enhancing merchandise assortment, improving the supply chain, strengthening digital capabilities and delivering better WOW products bodes well. The Zacks Rank #2 (Buy) stock further got a boost with the company’s sturdy holiday sales results that exceeded management’s expectations and hence, an upbeat view for the final quarter of fiscal 2020. Markedly, comparable sales rose 10.1% in the holiday period and marked the strongest increase for the festive season since 2011.

Encouragingly, the Philadelphia, PA-based company’s shares have appreciated 72.6% in six months, outperforming the industry’s 17% growth. The stock has also cruised ahead of the Retail-Wholesale sector’s 11.1% growth and the broader S&P 500’s 17.2% gain. The company’s expected long-term earnings growth rate of 21%, ahead of the industry’s 12.9%, further adds sheen.

Let’s Analyze Further

Five Below’s omnichannel endeavors to drive growth are quite appealing. The company has been working on digitizing vendor transactions and implementing a core merchandising platform. Further, it rolled out curbside pickup, launched the app and looks to accelerate the buy-online, pick-up-in-store business model. Markedly, the company is also offering same-day delivery service across some of its stores.



To offer expedited delivery services, Five Below also announced a partnership with Instacart. This collaboration aids the retailer in providing same-day delivery and curbside pickup across select stores. Also, the company had earlier made an investment in a gaming company called Nerd Street Gamers in order to attract children and teenagers. The company has also teamed up with Kyle Giersdorf aka “Bugha” for offering a new line of gaming products. Management is encouraged about these investments and looks to deepen overall commitment to gaming.

Now, talking of its store-related efforts, the company is committed to expanding its store base, as well as enhancing the in-store experience to draw traffic and increase customer base. The company believes that expanding scale will help it gain access to renowned shopping centers, capitalize on the emerging market trends and increase its brand value. Management had earlier anticipated opening 120 net new stores in fiscal 2020. Further, the company envisions having a network of more than 2,500 stores in the United States in the long run.

We note that the company has been adding more essential household and wellness products at compelling prices. In addition to hand sanitizers, wipes and masks, it also offers new home and personal care products. These along with flexibility in its business model and merchandise offerings have been fueling the company’s sales. Following a sturdy holiday performance, management guides fourth-quarter fiscal 2020 net sales between $835 million and $840 million. This suggests an improvement of 21.5-22.2% from the year-ago period. The company forecasts a comparable sales increase of about 11%. Coming to the bottom line, the company anticipates earnings in the range of $2.08-$2.12 per share for the final quarter, indicating growth of 6-8% from $1.96 reported in the same quarter a year earlier.

Given the impressive prospects including prudent digital and store-growth strategies, we expect Five Below to be well-poised for growth.

Other Key Picks in Retail

DICK'S Sporting Goods (DKS - Free Report) delivered an earnings surprise of 34.7% in the last four quarters, on average. It has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MarineMax (HZO - Free Report) , also a Zacks Rank #2 stock, delivered an earnings surprise of 99.9% in the last four quarters, on average.

Target (TGT - Free Report) has a long-term earnings growth rate of 8.5%. Currently, it carries a Zacks Rank #2.

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